SOTI, Inc. v. Impartner, Inc.

ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER
AND GRANTING MOTION TO COMPEL ARBITRATION

ROBERT
J. SHELBY, UNITED STATES DISTRICT JUDGE

Before
the court are two motions. Plaintiff SOTI moved for a
temporary restraining order, asking the court to enjoin
arbitration proceedings commenced by Defendant
Impartner.[1]Impartner then filed a Motion to Compel
Arbitration, asking the court to enforce an arbitration
provision in a contract with SOTI.[2] For the reasons explained
below, the court grants Impartner's Motion, and dismisses
the case in favor of mandatory arbitration. SOTI's
application for a temporary restraining order is denied.

BACKGROUND

This
dispute arises out of a contract between SOTI and Impartner
for the sale of software. The central questions presented are
whether the parties entered into a contract, and if so,
whether an arbitration provision was incorporated. The facts
surrounding the formation of the contractual relationship are
complicated, but important to the issues presented. They are
detailed here for that reason.

On June
28, 2016, Steve Oates, an employee at Impartner, emailed
SOTI's procurement manager, Sean McKay, about pricing
proposals for Impartner's relationship management
software.[3] McKay responded on June 29, asking to
delay discussing the proposal for a day.[4]Oates explained
that Impartner wanted to have an agreement for a sale of
Impartner's software “signed by end of the
quarter.”[5] Oates stated that certain pricing
incentives were available only if a purchase order form was
signed on or before June 30.[6]

McKay
responded that completing the deal by June 30 would be
“very difficult” because a purchase order would
first need to be presented to SOTI's CEO for
approval.[7] Oates asked to “go as fast as we
can, ” and suggested SOTI's legal team begin
looking at a draft Agreement.[8]Oates also requested McKay send
him the “commercial considerations” SOTI needed,
including pricing and terms.[9] Later that day, Oates further
proposed that McKay sign the Agreement supplied by Impartner,
leaving the purchase order number blank, and return it to
Impartner while SOTI worked “to turn around any
redlines to the terms of use” and receive CEO
approval.[10]Oates stated that if the parties later
were unable to agree on pricing and terms, Impartner would
“tear up the order.”[11] Oates sent McKay a letter
stating that the Agreement “constitutes SOTI's
commitment to the pricing, terms and conditions therein,
pending CEO Approval on or before Tuesday July 5th
2016.”[12] The letter provided that “[s]hould
the CEO decline approval, the order is invalid and the signed
Order Form will be shredded.”[13] McKay ultimately sent
Oates a signed Agreement on June 30 and stated he would be in
touch the following week after the Agreement was approved by
SOTI's CEO.[14]

The
signed Agreement stated three times that Impartner's
Terms of Use applied, and provided a URL to access the
Terms.[15] In its demand for arbitration, Impartner
submitted Terms of Use that contain a provision titled
“Arbitration, ” which states that “[a]ny
controversy or claim arising out of or relating to this
Agreement or the use of the Service shall be settled by
arbitration.”[16]

Following
a mutually agreed extension of time for SOTI's CEO
review, on July 7, McKay sent Oates “the signed
agreement as discussed” and requested “a detailed
invoice based on these numbers” so that McKay could
create a purchase order.[17] Oates thanked McKay and stated he
would be in touch about the next steps and that Imparter was
“looking forward to starting.”[18] That same
day, Impartner's CEO stated in an email to other
Impartner employees that he received a call from a SOTI
employee stating that SOTI's CEO “has signed the
final approval.”[19]

On July
19, Impartner's accountant sent McKay an invoice
“for set-up fees per contract signed
06-30-2016.”[20] After the accountant followed up twice
in August and September, McKay responded that he would
discuss the invoice with Oates.[21]

Meanwhile,
in July and August, employees from SOTI and Impartner emailed
each other several times about setting up a kickoff call and
demonstration.[22] Employees from both companies also
emailed about a presentation in which Impartner suggested
SOTI include an abstract stating that SOTI has selected a new
partner relationship management portal from
Impartner.[23]

In
September, McKay emailed Oates to raise concerns about a
Statement of Work and its relation to the licensing
terms.[24] In October, Mustafa Ebadi, who at the
time was SOTI's vice president, emailed Oates and stated
he “would still like to redo the contract once . . .
our legal team has signed off on the terms [and]
conditions.”[25] Ebadi expressed his understanding from
SOTI's legal team was that “they are not signing
off on this contract.”[26]

On
January 20, 2017, a member of SOTI's legal team emailed
two employees at Impartner and stated that the two
companies' CEOs had spoken the day before and come to a
“clear understanding” that “[t]he proposal
dated June 30, 2016 expired on July 5, 2016” and that
the invoice dated July 19, 2016 should be
voided.[27]

Impartner
submitted a demand for arbitration on March 5,
2018.[28] On April 9, SOTI initiated this action,
seeking declaratory judgment that no contract exists between
the parties[29]and issuance of a temporary restraining
order enjoining arbitration.[30] Impartner filed a Motion to
Compel Arbitration, asserting a valid contract exists that
requires the parties to arbitrate.[31] SOTI represented in its
Reply Memorandum that it is now seeking only a preliminary
injunction and not a temporary restraining
order.[32]

LEGAL
STANDARD

To show
it is entitled to a temporary restraining order or
preliminary injunction, SOTI must establish “(1) a
substantial likelihood of prevailing on the merits; (2)
irreparable harm unless the injunction is issued; (3) that
the threatened injury outweighs the harm that the preliminary
injunction may cause the opposing party; and (4) that the
injunction, if issued, will not adversely affect the public
interest.”[33] “Because a preliminary injunction
is an extraordinary remedy, [the movant's] right to
relief must be clear and unequivocal.”[34]

Impartner,
as the party seeking to compel arbitration, “has the
burden to show that . . . Arbitration Clauses exist and apply
to” SOTI.[35] If Impartner meets that initial burden,
SOTI “could attempt to rebut that showing with evidence
establishing a genuine dispute as to whether the provisions
apply.”[36] The court may grant a motion to compel
arbitration where “there are no genuine issues of
material fact regarding the parties' agreement, ”
giving the party resisting arbitration “the benefit of
all reasonable doubts and inferences that may
arise.”[37]

ANALYSIS

Both
Impartner's Motion to Compel Arbitration and the first
prong of the preliminary injunction analysis require the
court to address whether the parties entered into a contract
with an arbitration provision.

Before
deciding whether a dispute is arbitrable, the court must
first determine who should decide arbitrability-the court or
an arbitrator.[38] In making this decision, the court looks
to the language of the arbitration provision at issue.
However, in this case, the parties dispute whether the
arbitration provision is even incorporated into the signed
Agreement. Thus, in order to reach the issue of whether the
arbitration provision evinces the parties' intent to
arbitrate arbitrability, the court must first address
incorporation.

I.
Incorporation

SOTI
argues the Terms of Use document that contains the
arbitration provision is not incorporated into the Agreement
for several reasons.

First,
SOTI argues there is no evidence the URL in the Agreement
contained the same Terms of Use-including an arbitration
provision-that Impartner later provided in its demand for
arbitration.

The
Agreement references the Terms of Use three times and
provides a URL:
http://www.impartner.com/terms-of-use.aspx. In its
Reply in support of the Motion to Compel Arbitration,
Impartner submitted evidence by affidavit that the Terms of
Use available at that URL on the date SOTI signed the
Agreement contained the same arbitration provision as the
Terms of Use that Impartner submitted in its demand for
arbitration.[39] In contrast, SOTI has submitted no
evidence that the Terms of Use available at the URL on the
date it signed the Agreement did not contain the same
arbitration provision. Accordingly, no genuine issue of fact
exists as to whether the Terms of Use referenced in the
Agreement was the same document submitted in Impartner's
demand for arbitration.

Second,
SOTI argues the Agreement lacked sufficiently specific
language to incorporate the Terms of Use by reference.
“Incorporation by reference requires that the reference
. . . be clear and unequivocal, and alert the non-drafting
party that terms from another document are being
incorporated.”[40] SOTI argues the Agreement's
references to the Terms of Use are references only to what a
future contract would cover.

The
Agreement includes three references to the Terms of Use. The
first states that an “[a]greement to abide by the
Services Terms of Use” is part of the requirements for
the purchasing company, and it includes the URL to the Terms
of Use.[41] The second reference states that
“[a]ll licenses are subject to Terms of Use” and
again provides the URL.[42] The third reference, which is almost
directly above the signature line on the last page of the
Agreement, states that “You agree to abide by Terms of
Use for each Impartner licensed product.”[43] These three
references clearly and unequivocally incorporate the Terms of
Use into the Agreement. There is no language in the
references to the Terms of Use that supports an inference
they were intended only as part of a future contract.

Third,
SOTI argues it never specifically consented to the Terms of
Use. However, SOTI has pointed to no facts that would create
a genuine dispute on this issue. Impartner invited SOTI to
propose changes to the Terms of Use if it disagreed with
them. Had SOTI disagreed with the Terms, it had the ability
to refuse to sign the Agreement. Instead, SOTI raised no
disagreement with the Terms and signed the Agreement
incorporating the Terms without further negotiation. Thus,
there is no genuine dispute as to SOTI's consent to the
Terms of Use.

Fourth,
SOTI argues the Terms of Use itself implies the parties
intended the document to be a separate contract because the
version Impartner emailed SOTI contains a separate signature
block. However, the version of the Terms of Use that
Impartner states was available at the URL does not contain a
signature block. In any case, a signature block does not
negate the clear and unequivocal language of incorporation in
the Agreement. Thus, any signature block does not create a
genuine dispute of material fact as to incorporation.

Given
Impartner's showing that the Terms of Use contained the
arbitration provision on the date SOTI signed the Agreement
and the language of incorporation, the court concludes no
genuine dispute of material fact exists as to ...

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